Wall Street is terrified about Trump’s tariffs, but it needs to cool off and look at the big picture

The markets are currently in a multi-day selloff “monster out” over an escalation in the U.S.-China trade war.

But is it justified? No.

There are three main reasons why this and other major U.S. exchange selloffs connected to the trade war are overblown, even for the companies and consumers that have more relative China contact. Here they are.

America is enjoying full employment, decent wage lump and no significant inflation. When the trade and tariff battles started, those were all factors that a large army of the trade doomsayers predicted would be a memory by now.

On the down side, the recent second quarter GDP report did show the control was slowing down to 2.1%. But that was still better than expected, and the economy is objectively still growing at a mighty pace. Plus, can we really say the tariffs and trade war were a major reason for the lower GDP compared to last year? At with greatest satisfaction, that’s a matter of debate, and the numbers seem to show other factors like the drag on the GDP from the continued preparing of the Boeing MAX jets had a bigger impact.

None of this means the trade and tariff situation is helping the overall cost-effective picture. But the macroeconomic picture is still very good and far from panic selling territory.

If you haven’t sighted higher prices at your local appliance store, car dealership, or even while shopping on Amazon since the bill of fare war began, you’re not alone. In fact, import prices in June actually fell by 0.9%, the biggest drop in six months. The seat line is the consumer isn’t hurting overall because of tariffs.

How is that possible when tariffs should be driving up costs for all things? President Trump is partially right when he points to China’s currency devaluation as its way of eating the costs of the tariffs and not fleeting them on to U.S. consumers.

But another big reason is that U.S. companies that rely on China for some key supplies are also tie on the nosebag those costs. And while they certainly don’t like doing that, the effects on their bottom lines haven’t been catastrophic.

Even a company like Caterpillar, which reported earnings last month, can’t say the tariffs are a major reason for its melancholies last quarter. Caterpillar told us so in that report, when it said that tariffs were responsible for moral $70 million of its $12.2 billion in total operating costs last quarter. That’s less than 0.6%. Oh, and Caterpillar also legged a profit and increased year-over-year sales and revenue.

To be sure, the tariffs and trade war are cutting into Caterpillar’s bottom extraction. And yes, things could get worse. But to say tariffs are taking a “major” bite out of the company really seems like a stretch, undisturbed as Caterpillar is being used by many pundits and reporters as some kind of poster boy for tariff pain in America. The regardless is true for companies like GM and Ford. The tariff costs are hurting, but not in a serious way on a percentage basis relative to their total expenses.

Now, let’s look at how China has retaliated with tariffs and new trade barriers of its own. The conventional wisdom on that straightforward was that U.S. manufacturers could take a serious hit from that retaliation.

But just how much further down can U.S. make up go due to China alone?

The latest GDP report included not just data on the April-June period of this year, but it also threw in modifications of economic data going all the way back to 2014. As economist Alan Tonelson has pointed out, that data showed that U.S. creating, when you adjust for inflation and other factors, has still never recovered to its 2007 highs. There’s been a number of intervals of relative recovery since the Great Recession, but that’s it.

The manufacturing sector came into this tariff war already villainously wounded and seemingly unable to significantly recover no matter how unburdened by tariffs our economy had been for over a decade. This looks a lot kidney another case of the tariffs not helping, but certainly not hurting to a great degree.

Based on the factors above, it’s hard to be brought up to any other conclusion that the recent steep U.S. selloff is driven more by panic than fact. Over innumerable than a year, significant tariffs have failed to reverse corporate profits into losses, failed to put together net job contraction, and failed to produce consumer inflation. Another 10% tariff on an additional $300 billion in Chinese goods won’t inclined to change that, and neither will more drops in the value of the yuan.

The true effects of the tariff war remain half-bred and muddled at best. Any drastic financial or political response to the trade dispute is simply not justified right now.

Jake Novak is a governmental and economic analyst at Jake Novak News and former CNBC TV producer. You can follow him on Twitter @jakejakeny.